With interest rates rising, it’s time to remodel your house and sell, right? Not if you ask Leonard Baron, better known as “Professor Baron” to students, potential homeowners and wannabe real estate investors everywhere.

“Remodeling is a great thing to do as long as you’re going to own it and enjoy the improvements,” said Baron, who teaches people how to reduce risks when buying a house. “But it’s unlikely that on the improvements you do make that you’ll get more money out than what you put into it.”

Baron, who has purchased about 10 properties and turned them into rentals, took his experience and wrote “Real Estate Ownership and Due Diligence 101.” He now teaches this to students and potential investors at local colleges plus a class at the San Diego Association of Realtors.

He’s just seen too many remodels and flips with low-quality kitchen cabinets that are cheaper than the mid-grade offering at Home Depot. He’s gained an eye of experience and can spot cheap materials when walking into a flipped house.

“If I was looking at a property, I would look to see what was done, who did the work and tell them, ‘let me see the receipts.’ But if you start asking that, the seller will say we’re just going to sell it to someone else. Real estate is the most complicated, riskiest purchase we’re going to make and many people will put in more effort to save 10 cents on gas. They’re not about due diligence. But they didn’t know how to do it in the first place,” he said.

With San Diego home prices and interest rates on the rise, Baron answered questions about what he sees is happening in the local market and offers advice on simple steps every person can take when it comes to the real estate market.

Q: So, nay on remodeling?

A: I like doing remodeling-related stuff, but it’s a lot of work. People should try to buy properties that need less remodeling, not more. Construction costs are outrageous. It’s never fun and it never comes in at budget. As an investor, I try to buy properties that are in the best shape possible.

Q: What do you look for?

A: The properties I buy now need $10,000 to $15,000 of work. And I’m getting better at estimating costs, but it always ends up costing more. Sometimes you, as a buyer, get estimates on making changes. You do a kitchen and you plan for $25,000. But the contractor says it’ll cost $50,000. So you ask, “What can I get for $25,000?” But you never stick to that. When people go to Home Depot, they look at the least expensive stuff there but when it comes to actually buying, they end up saying, “Let’s buy the better stuff.” And later, they say yes, we didn’t think about taxes and delivery. It’s the reality of real estate.

Q: What’s your investment strategy?

A: I don’t resell. I only buy — single-family units. People who try to flip properties, it’s the same thing I said before. There’s a lot of great TV shows, like “Flip This House.” My belief is that it’s hard to imagine that in such a competitive marketplace, people are buying properties and doing the construction and making money on them. The average buyer thinks, “We’re going to buy at a big discount.” Flipping doesn’t work. Real estate people always embellish what they do. They say I bought it for $100,000 and sold it for $150,000. But what about the carrying costs, the rehab costs ...? And they say, Oh, I guess I didn’t make that much money. There’s no way to verify what they did unless they show you their income tax forms and no one is going to do that. When we lose money, who do we tell? Nobody.

Q: The too-good-to-be-true aphorism is true?

A: Like every other get-rich scheme, the chances of success are very, very low, even experienced guys get burned on deals. The market can change in three months and it’s going to take the average person, three to six months to get it done. The market may be hot, but then things change and costs are way more than you expected. Flipping is speculation. You’re hoping the value goes up and you’re hoping you’ll add value by improving the property. But the likelihood is unlikely. You can spend $75,000 to $80,000 on the house. But every improvement doesn’t add more value than it costs. And I’m the biggest fan of real estate, but I’m a long-term investor. And maybe I’m just chicken and that’s OK. You can say that. I’m looking for long-term assets. We’ll know (if I’ve made a good investment) in 15 years.

Q: Do you enjoy being a real estate investor?

A: It’s not as glamorous as people think. And it’s hard work. There are very few people who own several properties. It’s a personal decision. It’s still a good time to buy because interest rates are still very low. It’s too bad rates have gone up a bit. But they were never below 6 percent until three years ago. Prices are still down. It’s still a good time to buy real estate. All the fancy properties, though, make no sense. You won’t live long enough to get positive cash flow from those properties.

Q: Sounds like common sense.

A: I’m pretty smart and savvy now about buying real estate. But I never figured this stuff out (early on). I bought some properties in 2003 and wanted to offload them in 2006. But five to six years ago, it wasn’t like you had to get cash flow on properties. Now, I teach that to investors every month. Here are the properties. I give people a spreadsheet, a model and tell them to go find the property, put down the expenses, the property insurance and mortgage. And ask, does this make financial sense? Downtown San Diego condos make no sense at all. You’ll literally wait 30 years to make positive cash flow. But in El Cajon, you’re positive from day one.

Q: Is today’s real estate environment different from the previous housing craze?

A: The conditions last time, it was pure euphoria in the marketplace. Right now, it’s a good time to buy, there are low interest rates and properties are affordable. The problem now is there are no properties available.

Q: What do you look for in a property?

A: As an investor, you want a property in better shape over worst. You want cash-flow positive. A beautiful property in La Jolla that’s been beautifully remodeled is going to be a terrible investment (because chances are the monthly mortgage will be higher than what you can rent it out for). My other concern with people flipping properties is they’re not doing a good job in construction. Ooooh, new appliances, and stainless steel, new cabinets — it’s just junk. I’m thinking it’s the lowest-grade stuff.

Q: Best advice for potential homeowners or investors?

A: Do due diligence. Pro forma, put in rents and you quickly realize that half the properties make no sense at all. Look at the home association and its rules. Look at titles. Get two different quotes on financing. Skip the get-rich quick. If it involves making money easy and fast or using someone else’s money and not taking a risk, it’s probably not going to come true. Real estate is an asset. You want to earn money over the long term. As for remodeling, get many bids, do your homework and make sure you call references. Check insurance certificates and try not to make change orders along the way. Mostly, check references.